Individual Mandate

The individual mandate is just a fancy way of saying that everyone has to buy insurance. It’s one of the backbones of the ACA. Insurance works by spreading the risk among many, and the mandate is a way to make sure that there are many.

Health insurance works by taking in money from lots of people. Some of these insured people might have no claims in a year, most will have a few, and a few will have large claims. The individual mandate guarantees that the pool is large enough that costs balance out.

The government uses two main tool to enforce the mandate. One is sort of a push, the other is a pull. The push encourages participation with IRS penalties if you don’t have insurance. They assess a penalty as part of your income tax. The amount varies by income and is increasing every year. The pull is a discount or subsidy offered through the insurance exchanges for many depending on income. The subsidy can be in several forms including discounts on premiums or reductions in out of pocket expenses like deductibles and copays.

Discounted premiums are available through your state’s marketplace or healthcare.gov. As of this writing, discounts start somewhere around 4X the federal poverty level, that’s about $55,000 yearly income for a family of 4. Reduction in out of pocket expenses vary by state’s Medicare policies. Some states are more generous than others. These dollar amount calculations are very complex and well beyond what I can explain in this site. For specifics, go to the federal healthcare site at healthcare.gov.

This is where the major opposition to the Affordable Care Act begins. Some people just don’t want to pay for insurance and don’t think that they should be forced to. They argue points such as freedom to choose, liberty from government mandates, and the cost. Of course, some just want to wait until they’re sick to purchase insurance. The government’s rationale is that everyone needs healthcare, just about everyone will use it, and there should be a mechanism in place to pay for it.